| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
| Dec. 31, 2018 |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
| Basis of Presentation | Basis of Presentation
The consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and certain entities, which are consolidated in accordance with the provisions of the Financial Accounting Standards Board’s (“FASB”) authoritative guidance on the consolidation of variable interest entities since it is determined that the Company is the primary beneficiary of these entities.
Certain reclassifications have been made in the December 31, 2016 financial statements to conform to the Company’s consolidated income statements to how it analyzes its operations in the current period. These changes did not impact operating income. For the year ended December 31, 2016 the aggregate impact of the changes included a decrease to termination and access fees of $4.9 million, an increase to engineering and operations expenses of $7.5 million, a decrease to sales and marketing expenses of $0.8 million, an increase to equipment expense of $0.6 million and a decrease to general and administrative expenses of $2.4 million. |
| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates relate to the allowance for doubtful accounts, useful lives of the Company’s fixed and finite-lived intangible assets, allocation of purchase price to assets acquired and liabilities assumed in business combinations, fair value of indefinite-lived intangible assets, goodwill and income taxes. Actual results could differ significantly from those estimates. |
| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all investments with an original maturity of three months or less at date of purchase to be cash equivalents. The Company places its cash and temporary investments with banks and other institutions that it believes have a high credit quality. At December 31, 2018, the Company had deposits with banks in excess of FDIC insured limits and $25.2 million of its cash is on deposit with noninsured institutions such as corporate money market issuers and cash held in foreign banks. The Company’s cash and cash equivalents are not subject to any restrictions (see Note 9). As of December 31, 2018 and 2017, the Company held $7.5 million and $12.6 million, respectively, of its cash in Guyana dollars. While there are risks associated with the conversion of Guyana dollars to U.S. dollars due to limited liquidity in the Guyana foreign currency markets, to date it has not prevented the Company from converting Guyana dollars into U.S. dollars within a given three month period or from converting at a price that reasonably approximates the reported exchange rate. |
| Short Term Investments | Short Term Investments
The Company's short-term investments consist of corporate bonds, which have remaining maturities of more than three months at the date of purchase, and equity securities classified as available for sale, which are stated at fair value. Unrealized gains and losses are recorded in other income. The estimated fair values of investments are based on quoted market prices as of the end of the reporting period. |
| Restricted Cash | Restricted Cash
The Company generally classifies cash that is legally restricted as to withdrawal or usage as restricted cash. Generally, the cash is restricted due to debt service obligations, acquisitions, or to support the Company’s telecommunications operations. In 2018, the Company disposed of $8.4 million of restricted cash as a result of the U.S. Solar Transaction described in Note 4. |
| Allowance for Doubtful Accounts | Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts for the estimated probable losses on uncollectible accounts receivable. The allowance is based upon a number of factors including the credit worthiness of customers, the Company’s historical experience with customers, the age of the receivable and current market and economic conditions. Such factors are reviewed and updated by the Company on a quarterly basis. Uncollectible amounts are charged against the allowance account. |
| Inventory, Materials and Supplies | Inventory, Materials and Supplies
Inventory, materials and supplies primarily include handsets and other equipment held for sale to customers. These balances are recorded at the lower of cost or market cost being determined on the basis of specific identification and market determined using replacement. |
| Fixed Assets | Fixed Assets
The Company’s fixed assets are recorded at cost and depreciated using the straight‑line method generally between 3 and 39 years. Expenditures for major renewals and betterments that extend the useful lives of fixed assets are capitalized. Repairs and replacements of minor items of property are charged to maintenance expense as incurred. The cost of fixed assets in service and under construction includes an allocation of indirect costs applicable to construction. Grants received for the construction of assets are recognized as a reduction of the cost of fixed assets, a reduction of depreciation expense over the useful lives of the assets and as a reduction of capital expenditures in the statements of cash flows.
The fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred if a reasonable estimate of fair value can be made. In periods subsequent to initial measurement, period‑to‑period changes in the liability for an asset retirement obligation resulting from the passage of time and revisions to either the timing or the amount of the original estimate of undiscounted cash flows are recognized. The increase in the carrying value of the associated long‑lived asset is depreciated over the corresponding estimated economic life. The consolidated balance sheets include accruals of $3.8 million and $3.9 million as of December 31, 2018 and 2017, respectively, for estimated costs associated with asset retirement obligations.
In accordance with the authoritative guidance for the accounting for the impairment or disposal of long‑lived assets, the Company evaluates the carrying value of long‑lived assets, including property and equipment, in relation to the operating performance and future undiscounted cash flows of the underlying business whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted cash flows attributable to an asset are less than its carrying amount. If an asset is deemed to be impaired, the amount of the impairment loss recognized represents the excess of the asset’s carrying value as compared to its estimated fair value, based on management’s assumptions and projections.
Management’s estimate of the future cash flows attributable to its long‑lived assets and the fair value of its businesses involve significant uncertainty. Those estimates are based on management’s assumptions of future results, growth trends and industry conditions. If those estimates are not met, the Company could have additional impairment charges in the future, and the amounts may be material.
The Company did not record any fixed asset impairments for the year ended December 31, 2018. See Note 3, Impact of Hurricanes Irma and Maria , regarding the Company’s write off of certain damaged fixed assets. See Note 4, Disposition- U.S. Telecom, regarding the Company’s impairment of certain fixed assets in the year ended December 31, 2016. |
| Goodwill and Indefinite-Lived Intangible Assets | Goodwill and Indefinite‑Lived Intangible Assets
Goodwill is recognized in business combinations equal to the amount by which the cost of acquired net assets exceeded the fair value of those net assets on the date of acquisition. The Company allocates goodwill to reporting units at the time of acquisition and bases that allocation on which reporting units will benefit from the acquired assets and liabilities. Reporting units are defined as operating segments or one level below an operating segment, referred to as a component. The Company has determined that its reporting units are components of its multiple operating segments. The Company assesses goodwill for impairment on an annual basis in the fourth quarter or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The assessment begins with a qualitative analysis to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If the reporting unit passes this analysis, the impairment assessment is complete and no impairment is recorded. If the reporting unit does not pass the analysis, the Company performs additional quantitative analysis by calculating the fair value of the reporting unit. If the fair value exceeds the carrying value, the test is complete and no impairment is recorded. If the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit an impairment charge is recorded equal to the excess, but not more than the total amount of goodwill allocated to the reporting unit.
A significant majority of the Company’s telecommunications licenses are not amortized and are carried at their historical costs. The Company believes that telecommunications licenses generally have an indefinite life based on the historical ability to renew such licenses, that such renewals may be obtained indefinitely and at little cost, and that the related technology used is not expected to be replaced in the foreseeable future. The Company has elected to perform its annual testing of its telecommunications licenses in the fourth quarter of each fiscal year, or more often if events or circumstances indicate that there may be impairment. If the value of these assets were impaired by some factor, such as an adverse change in the subsidiary’s operating market, the Company may be required to record an impairment charge. The impairment test consists of a comparison of the fair value of telecommunications licenses with their carrying amount on a license by license basis and as a part of the test the Company assesses the appropriateness of the application of the indefinite‑lived assertion.
As of December 31, 2018 and 2017, the Company performed its annual impairment assessment of its goodwill and indefinite‑lived intangible assets (telecommunications licenses) and determined that no impairment charge was required. See Note 8 for a discussion of the Company’s quantitative and qualitative tests of its goodwill. Also, see Note 4, Disposition- U.S. Telecom, regarding the Company’s impairment of goodwill in the year ended December 31, 2016. |
| Other Intangible Assets | Other Intangible Assets
Intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets acquired. These include acquired customer relationships, tradenames, and franchise rights.
Customer relationships are amortized over their estimated lives ranging from 7-13 years, which are based on the pattern in which economic benefit of the customer relationship is estimated to be realized. |
| Debt | Debt
Debt is measured at amortized cost. Debt issuance costs on term loans and specified maturity borrowings are recorded as a reduction to the carrying value of the debt and are amortized as interest expense in the consolidated income statements over the period of the debt. Fees related to revolving credit facilities and lines of credit are recorded in other assets in the consolidated balance sheet and are amortized as interest expense in the consolidated income statements over the life of the facility. Except for interest costs incurred for the construction of a qualifying asset which are capitalized during the period the assets are prepared for their intended use, interest costs are expensed. |
| Non-Controlling Interests | Non‑Controlling Interests
The non‑controlling interests in the accompanying consolidated balance sheets reflect the original investments and subsequent capital contributions made by the minority stockholders in the Company’s subsidiaries which are less than wholly-owned. Non-controlling interests acquired in a business combination are initially recorded at fair value. Subsequently, all non-controlling interest is adjusted for the minority stockholder’s proportional share of the earnings or losses, net of any distributions. |
| Changes in Accumulated Other Comprehensive Income (Loss) | Changes in Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss), by component, were as follows (in thousands):
Projected
Pension
Benefit
Translation
Obligation
Adjustment
Other
Total
Balance at December 31, 2015
$
(3,481)
$
(223)
$
—
$
(3,704)
Adjust funded status of pension plan, net of tax of $0.7 million
5,251
—
—
5,251
Foreign currency translation adjustment
—
(687)
—
(687)
Unrealized gain on marketable securities
—
—
868
868
Balance at December 31, 2016
1,770
(910)
868
1,728
Adjust funded status of pension plan, net of tax of $0.7 million
1,357
—
—
1,357
Foreign currency translation adjustment
—
1,265
—
1,265
Reclassifications of gains on sale of marketable securities to net income
—
—
(1,044)
(1,044)
Unrealized gain on marketable securities
—
—
440
Balance at December 31, 2017
3,127
355
264
3,746
Adjust funded status of pension plan, net of tax of $0.6 million
(840)
—
—
(840)
Foreign currency translation adjustment
—
(4,390)
—
(4,390)
Adoption of ASU 2016-01
—
—
(203)
(203)
Interest rate swap
—
—
78
78
Balance at December 31, 2018
$
2,287
$
(4,035)
$
139
$
(1,609)
Amounts reclassified from accumulated other comprehensive income to net income were as follows (in thousands):
2018
2017
2016
Pension and other postretirement benefit plans
$
54
$
$
Realized gains on marketable securities
—
(1,044)
—
Total
$
54
$
(328)
$
1,300 |
| Revenue Recognition | Revenue Recognition
The Company earns revenue from its telecommunication and renewable energy operations. The Company recognizes revenue through the following steps:
-
Identification of the contract with a customer
-
Identification of the performance obligations in the contract
-
Determination of the transaction price
-
Allocation of the transaction price to the performance obligations in the contract
-
Recognize revenue when, or as, the Company satisfies performance obligations
Revenue Recognition- Telecommunications
Wireless revenue consists of wholesale and retail revenue. Wholesale revenue is generated from providing mobile voice and data services to the customers of other wireless carriers, the provision of network switching services and certain transport services using the Company’s wireless networks. The transaction price of some wholesale revenue contracts includes variable consideration in the form of volume discounts. Management uses its judgment based on projected transaction volumes to estimate the transaction price and to allocate the transaction price to the performance obligations in the contract. Revenue is recognized over time as the service is rendered to the customer. Retail revenue is generated from providing mobile voice and data services to subscribers as well as roaming services provided to other carriers’ customers roaming into the Company’s retail markets. This revenue is recognized over time as the service is rendered. Lastly, wireless revenue includes revenues from equipment sold to customers which is recognized when the equipment is delivered to the customer.
Management considers transactions where customers purchase subsidized or discounted equipment and mobile voice or data services to be a single contract. For these contracts, the transaction price is allocated to the equipment and mobile service based on their standalone selling prices. The standalone selling price is based on the amount the Company charges for the equipment and service to similar customers. Equipment revenue is recognized when the equipment is delivered to customers and service revenue is recognized as service is rendered.
Wireline revenue is generated from access and usage fees for internet, voice and video services charged to subscribers as well as wholesale long-distance voice services provided to telecommunication carriers at contracted rates. Revenue from these contracts is recognized over time as the service is rendered to the customer.
The Company’s wireless and wireline contracts occasionally include promotional discounts such as free service periods or discounted products. If a contract contains a substantive termination penalty, the transaction price is allocated to the performance obligations based on standalone selling price resulting in accelerated revenue recognition and the establishment of a contract asset that will be recognized over the life of the contract. If a contract includes a promotional discount but no substantive termination penalty the discount is recorded in the promotional period and no contract asset is established. The Company’s customers also have the option to purchase additional telecommunication services. Generally, these options are not performance obligations and are excluded from the transaction price because they do not provide the customers with a material right.
The Company may charge upfront fees for activation and installation of some of its products and services. These fees are reviewed to determine if they represent a separate performance obligation. If they are not a separate performance obligation, the contract price associated with them is recognized over the life of the customer. If the fees represent a performance obligation they are recognized when delivered to the customer based on standalone selling price.
Sales and use and state excise taxes collected from customers that are remitted to the governmental authorities are reported on a net basis and excluded from the revenues and sales.
Revenue Recognition-Renewable Energy
Revenue from the Company’s Renewable Energy segment is generated from the sale of electricity through power purchase agreements (“PPAs”) with various customers that generally range from 10 to 25 years. The Company recognizes revenue at contractual PPA rates over time as electricity is generated and simultaneously consumed by the customer. In the United States, the Company’s Renewable Energy segment also generates revenue from the sale of Solar Renewable Energy Credits (“SRECs”). Revenue is recognized over time as SRECs are sold through long-term purchase agreements at the contractual rate specified in the agreement. |
| Contract Acquisition Costs | Contract Acquisition Costs
The Company pays sales commissions to its employees and agents for obtaining customer contracts. These costs are incremental because they would not have been incurred if the contract was not obtained. The Company recognizes an asset for these costs and subsequently amortizes the asset on a systematic basis consistent with the pattern of the transfer of the services to the customer. The amortization period, which is between 2 and 6 years, considers both the original contract period as well as anticipated contract renewals as appropriate. The amortization period also includes renewal commissions when those commissions are not commensurate with new commissions. The Company estimates contract renewals based on its actual renewals in recent periods. When the expected amortization period is one year or less the Company utilizes the practical expedient and expenses the costs as incurred. |
| Operating Expenses | Operating Expenses
Termination and access fee expenses. Termination and access fee expenses are charges that are incurred for voice and data transport circuits (in particular, the circuits between the Company’s wireless sites and its switches), internet capacity, video programming costs, other access fees the Company pays to terminate its calls, telecommunication spectrum fees and direct costs associated with the Company’s managed services and technology business as well as within its Renewable Energy segment. Termination and access fees also include the cost of handsets and customer resale equipment incurred by the Company’s retail businesses.
Engineering and operations expenses. Engineering and operations expenses include the expenses associated with developing, operating and supporting the Company’s expanding telecommunications networks and renewable energy operations, including the salaries and benefits paid to employees directly involved in the development and operation of the Company’s networks and renewable energy operations.
Sales and marketing expenses. Sales and marketing expenses include salaries and benefits the Company pays to sales personnel, customer service expenses, sales commissions and the costs associated with the development and implementation of the Company’s promotion and marketing campaigns.
General and administrative expenses. General and administrative expenses include salaries, benefits and related costs for general corporate functions including executive management, finance and administration, legal and regulatory, facilities, information technology and human resources. General and administrative expenses also include internal costs associated with the Company’s performance of due-diligence in connection with acquisition activities.
Transaction-related charges. Transaction-related charges include the external costs, such as legal, tax, accounting and consulting fees directly associated with acquisition and disposition-related activities, which are expensed as incurred. Transaction-related charges do not include internal costs, such as employee salary and travel-related expenses, incurred in connection with acquisitions or dispositions or any integration-related costs.
Restructuring charges. Restructuring charges are costs incurred as a result of reorganizing the Company’s operating from acquisition or disposition activities.
Depreciation and amortization expenses. Depreciation and amortization expenses represent the depreciation and amortization charges the Company records on its property and equipment and on certain intangible assets.
Impairment of intangible assets. The Company evaluates the carrying value of its long lived assets, including property and equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted cash flows attributable to non-current assets subject to depreciation and amortization and discounted cash flows for intangible assets not subject to amortization are less than their carrying amount. For long lived assets other than goodwill, if an asset is deemed to be impaired, the amount of the impairment loss recognized represents the excess of the asset’s carrying value as compared to its estimated fair value, based on management’s assumptions and projections.
The Company also assesses the carrying value of goodwill and indefinite‑lived intangible assets on an annual basis or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. The carrying value of each reporting unit, including goodwill assigned to that reporting unit, is compared to its fair value. If the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit an impairment charge is recorded equal to the excess, but not more than the total amount of goodwill allocated to the reporting unit.
(Gain) loss on disposition of long-lived assets. The Company sells or disposes assets from time to time. A gain or loss is recorded by comparing the carrying amount of the assets to the proceeds received.
Loss on damaged assets and other Hurricane-related charges, net of insurance recovery. During September 2017, the Company’s operations and customers in the U.S. Virgin Islands were severely impacted by Hurricanes Irma and Maria (the “Hurricanes”). Loss on damaged assets and other hurricane related charges, net of insurance recovery represents the write off of damaged assets, net of insurance recoveries and also includes additional operating expenses that were specifically incurred to address the impact of the Hurricanes. |
| Accounting for Grants | Accounting for Grants
The Company receives funding from the U.S. Government and its agencies under Stimulus and Universal Service Fund and other programs. These funding programs are generally designed to fund telecommunications operations, and infrastructure expansion into rural or underserved areas. The funding programs are evaluated to determine if they represent funding related to revenue, capital expenditures, or operating activities. Funding for revenue and operating activities are recorded as revenue or contra expense in the Company’s consolidated income statement as the services are provided. Funding for capital expenditures is recorded as a reduction to property, plant and equipment on the Company’s consolidated balance sheets and a future reduction in depreciation expense in the consolidated income statements. Government funding related to revenue and operations are recorded as operating cash inflows and grants for capital expenditures are recorded as investing cash inflows.
The Company monitors government funding for grant requirements to ensure that conditions related to grants have been met and there is reasonable assurance that the Company will be able to retain the grant proceeds and to ensure that any contingencies that may arise from not meeting the conditions are appropriately recognized. See Note 10, Government Grants . |
| Income Taxes | Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax‑planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more‑likely‑than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related authority. It is possible that the ultimate resolution of these uncertain matters may be greater or less than the amount that the Company estimated. If payment of these amounts proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period in which it is determined that the liabilities are no longer necessary. If the estimate of tax liabilities proves to be more than the ultimate assessment, a further charge to expense would result.
The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.
The Company does not provide for United States income taxes on earnings of foreign subsidiaries as such earnings are considered to be indefinitely reinvested. The Tax Cuts and Jobs Act of 2017 resulted in a one-time transition tax on the deemed repatriation of foreign earnings for federal tax purposes. |
| Credit Concentrations and Significant Customers | Credit Concentrations and Significant Customers
Historically, the Company has been dependent on a limited amount of customers for its wholesale roaming business. For the year ended December 31, 2018, one customer accounted for 11% of the Company’s consolidated revenue. For the years ended December 31, 2017, two customers accounted for 13% and 10% of the Company’s consolidated revenue. For the year ended December 31, 2016, two customers accounted for 14% and 12% of the Company’s consolidated revenue.
As of December 31, 2018, no customer accounted for more than 10% of the Company’s consolidated accounts receivable. As of December 31, 2017, one customer accounted for 18% of the Company’s consolidated accounts receivable, net of allowances. |
| Foreign Currency Gains and Losses | Foreign Currency Gains and Losses
The Company translate the assets and liabilities of its foreign subsidiaries from their respective functional currencies, primarily the Indian Rupee and the Guyana Dollar, to U.S. dollars at the appropriate spot rates as of the balance sheet date. Changes in the carrying value of these assets and liabilities attributable to fluctuations in spot rates are recognized in foreign currency translation adjustment, a component of accumulated other comprehensive income. Income statement accounts are translated using the monthly average exchange rates during the year.
Monetary assets and liabilities denominated in a currency that is different from a reporting entity’s functional currency must first be remeasured from the applicable currency to the legal entity’s functional currency. The effect of this remeasurement process is reported in other income on the income statement. |
| Employee Benefit Plans | Employee Benefit Plans
The Company sponsors pension and other postretirement benefit plans for employees of certain subsidiaries. Net periodic pension expense is recognized in the Company’s income statement. The service cost component of net periodic pension expense is presented with other employee compensation within income from operations. Other components of net periodic pension expense, such as interest cost, expected return on plan assets, and amortization of actuarial gains and losses are presented in other income. The Company recognizes a pension or other postretirement benefit plan’s funded status as either an asset or liability in its consolidated balance sheet. Actuarial gains and losses are deferred, reported as a component of other comprehensive income, and amortized through net periodic pension expense in subsequent periods. |
| Fair Value of Financial Instruments | Fair Value of Financial Instruments
In accordance with the provisions of fair value accounting, a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability and defines fair value based upon an exit price model.
The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:
Level 1
Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 assets and liabilities include money market funds, debt and equity securities and derivative contracts that are traded in an active exchange market.
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange‑traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate obligations and non‑exchange traded derivative contracts.
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments and intangible assets that have been impaired whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
Assets and liabilities of the Company measured at fair value on a recurring basis as of December 31, 2018 and 2017 are summarized as follows:
December 31, 2018
Significant Other
Quoted Prices in
Observable
Active Markets
Inputs
Description
(Level 1)
(Level 2)
Total
Certificates of deposit
$
—
$
380
$
380
Money market funds
2,266
—
2,266
Short term investments
393
—
393
Commercial paper
—
13,972
13,972
Interest rate swap
—
140
140
Total assets and liabilities measured at fair value
$
2,659
$
14,492
$
17,151
December 31, 2017
Significant Other
Quoted Prices in
Observable
Active Markets
Inputs
Description
(Level 1)
(Level 2)
Total
Certificates of deposit
$
—
$
391
$
391
Money market funds
2,894
—
2,894
Short term investments
555
6,521
7,076
Commercial paper
—
49,954
49,954
Interest rate swap
—
52
52
Total assets and liabilities measured at fair value
$
3,449
$
56,918
$
60,367
Certificate of Deposit
As of December 31, 2018 and December 31, 2017 this asset class consisted of a time deposit at a financial institution denominated in U.S. dollars. The asset class is classified within Level 2 of the fair value hierarchy because the fair value was based on observable market data.
Money Market Funds
As of December 31, 2018 and December 31, 2017, this asset class consisted of a money market portfolio that comprises Federal government and U.S. Treasury securities. The asset class is classified within Level 1 of the fair value hierarchy because its underlying investments are valued using quoted market prices in active markets for identical assets.
Short Term Investments and Commercial Paper
As of December 31, 2018 and December 31, 2017, these asset classes consisted of short term foreign and U.S. corporate bonds, equity securities, and commercial paper. Corporate bonds and commercial paper are classified within Level 2 of the fair value hierarchy because the fair value is based on observable market data. Equity securities are classified within Level 1 because fair value is based on quoted market prices in active markets for identical assets. The Company held equity securities with a fair value of $0.3 million and $0.6 million at December 31, 2018 and December 31, 2017, respectively. Net income for the year ended December 31, 2018 includes $0.3 million of losses on these securities.
Other Fair Value Disclosures
The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximate their fair values because of the relatively short-term maturities of these financial instruments. The fair value of the interest rate swap is measured using Level 2 inputs.
At December 31, 2018, the Company holds $23.1 million of equity securities consisting of non-controlling investments in privately held companies. These investments, over which the Company does not have the ability to exercise significant influence, are without readily determinable fair values. The investments are measured at cost, less any impairment, adjusted for observable price changes of similar investments of the same issuer. Fair value is not estimated for these investments if there are no identified events or changes in circumstances that may have an effect on the fair value of the investment. The carrying value of the strategic investments was $ 23.1 million and $20.1 million at December 31, 2018 and December 31, 2017, respectively. As of December 31, 2018 no impairments or price adjustments were recorded on the investments. Strategic investments are included with other assets on the consolidated balance sheets.
The fair value of long-term debt is estimated using Level 2 inputs. At December 31, 2018, the fair value of long-term debt, including the current portion, was $91.6 million and its book value was $ 91.0 million. At December 31, 2017, the fair value of long-term debt, including the current portion, was $159.2 million and its book value was $155.8 million. |
| Net Income Per Share | Net Income Per Share
Basic net income per share is computed by dividing net income attributable to the Company’s stockholders by the weighted‑average number of common shares outstanding during the period and does not include any other potentially dilutive securities. Diluted net income per share gives effect to all potentially dilutive securities using the treasury stock method.
The reconciliation from basic to diluted weighted average shares of Common Stock outstanding is as follows (in thousands):
Year ended December 31,
2018
2017
2015
Basic weighted-average shares of common stock outstanding
15,988
16,138
16,131
Stock options
54
72
96
Diluted weighted-average shares of common stock outstanding
16,042
16,210
16,227
The following notes the number of potential shares of common stock not included in the above calculation because the effects of such were anti‑dilutive (in thousands of shares):
For the Year Ended
December 31,
2018
2017
2016
Stock options
5
7
5
Total
5
7
5 |
| Stock-Based Compensation | Stock‑Based Compensation
The Company applies the fair value recognition provisions of the authoritative guidance for the accounting for stock‑based compensation and is expensing the fair value of the grants of options to purchase common stock over their vesting period of four years. Relating to grants of options, the Company recognized $0.1 million, $0.1 million and $0.1 million of non‑cash, share‑based compensation expense during 2018, 2017, and 2016, respectively. See Note 11 for assumptions used to calculate the fair value of the options granted.
The Company also issued 111,474 restricted shares of common stock in 2018; 95,095 restricted shares of common stock in 2017 and 100,005 restricted shares of common stock in 2016. These shares are being charged to income based upon their fair values over their vesting period of four years. The Company accounts for forfeitures as they occur. Non‑cash equity‑based compensation expense, related to the vesting of restricted shares issued was $6.1 million, $6.6 million and $6.2 million in 2018, 2017, and 2016, respectively.
In connection with certain acquisitions, the Company issued shares of the acquired company to its local management and recorded $0.2 million, $0.3 million, and $0.1 million of stock based compensation during 2018, 2017 and 2016, respectively.
Stock‑based compensation expense is recognized within general and administrative expenses within the consolidated income statements. |
| Business combinations | Business Combinations
The Company accounts for business combinations using the acquisition method of accounting, under which the purchase price of the acquisition is allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. Contingent consideration obligations that are elements of the consideration transferred are recognized as of the acquisition date as part of the fair value transferred in exchange for the acquired business. Acquisition-related costs incurred in connection with a business combination are expensed as incurred. |
| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), and subsequently issued related updates, (collectively known as ASC 606), which provides a single, comprehensive revenue recognition model for all contracts with customers. The revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on January 1, 2018. Refer to Note 3 to the Consolidated Financial Statements in this Report.
In April 2015, the FASB issued ASU 2015-05, “Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement”, which provides guidance about whether a cloud computing arrangement includes software and how to account for the license for software. The new guidance does not change the accounting for a customer’s accounting for service contracts. The adoption of ASU 2015-05 by the Company on January 1, 2017 did not have a material impact on the Company’s financial position, result of operations or cash flows.
In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company adopted this standard on January 1, 2018. Upon adoption the Company held $20.1 million of equity investments that did not have readily determinable fair values. As a result these investments are measured at cost less impairments, adjusted for observable price changes of similar investments of the same issuer. The Company has not adjusted the cost of these investments since acquisition. Upon adoption, the Company held $0.6 million of equity investments with readily determinable fair values and reclassified $0.2 million of unrealized gains on this investment to retained earnings.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and subsequently issued related updates (“ASU 2016-02”), which provide comprehensive lease accounting guidance. The standard requires entities to recognize lease assets and liabilities on the balance sheet as well as disclosure of key information about leasing arrangements. ASU 2016-02 will become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company has implemented new systems, processes and controls to implement the guidance. The Company will adopt the standard on January 1, 2019 by applying the new lease requirements at the effective date and will recognize a cumulative-effect adjustment to the opening balance sheet retained earnings in the period of adoption with no adjustments to prior periods. The Company expects to adopt the package of practical expedients which allows it to not reassess: i) whether an arrangement contains a lease, ii) operating and capital lease classifications; and iii) previously recorded initial direct costs. The adoption will result in right to use assets and liabilities being recorded on the Company’s balance sheet. The Company is finalizing quantitative information related to the impact of the guidance including the incremental borrowing rates for classes of leases. The right of use asset and liability balances recorded will be material to the Company’s financial statements.
In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The Company adopted ASU 2016-09 on January 1, 2017. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. This had no impact on the Company’s historical results. Also as a result of the adoption, the Company changed its policy election to account for forfeitures as they occur rather than on an estimated basis. The change resulted in the Company reclassifying $0.3 million from additional paid-in capital to retained earnings for the net cumulative-effect adjustment in stock compensation expense related to prior periods.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”), which provides further clarification on eight cash flow classification issues. The Company adopted this standard on January 1, 2018. In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” (“ASU 2016-18”). The amendments in ASU 2016-18 are intended to reduce diversity in practice related to the classification and presentation of changes in restricted cash or restricted cash equivalents on the statement of cash flows. The amendments in ASU 2016-18 require that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard on January 1, 2018.
The Company’s statement of cash flows reports the cash effects during a period of an entity’s operations, its investing transactions, and its financing transactions. The statement of cash flows explains the change during the period in the total cash which includes cash equivalents as well as restricted cash. The Company applies the predominance principle to classify separately identifiable cash flows based on the nature of the underlying cash flows. Debt prepayment or extinguishment costs are classified as cash outflows from financing activities. Contingent consideration payments made three months or less after a business combination are classified as investing activities and those made after that time are classified as financing activities. Proceeds from the settlement of insurance claims are classified on the basis of the nature of the loss. Prior to January 1, 2018, the Company classified all payments made in a business combination as investing activities and did not include restricted cash in total cash. The adoption of ASU 2016-15 and ASU 2016-18 impacted the Company’s cash flows for the years ended December 31, 2017 and December 31, 2016 as indicated below (amounts in thousands):
Statement of Cash flows
Year ended December 31, 2017
Year ended December 31, 2016
Reported
Change
Under previous guidance
Reported
Change
Under previous guidance
Net cash provided by operating activities
$
145,725
$
—
$
145,725
$
111,656
$
—
$
111,656
Net cash used in investing activities
(172,318)
5,525
(166,793)
(296,580)
(12,108)
(308,688)
Net cash used in financing activities
(42,101)
1,178
(40,923)
75,334
—
75,334
Effect of foreign currency exchange rates on total cash
226
—
226
(626)
—
(626)
Net change in total cash
$
(68,468)
$
6,703
$
(61,765)
$
(110,216)
$
(12,108)
$
(122,324)
Total cash, beginning of period
288,358
(18,637)
269,721
398,574
(6,529)
392,045
Total cash, end of period
$
219,890
$
(11,934)
$
207,956
$
288,358
$
(18,637)
$
269,721
In October 2016 the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory”. The new standard eliminates all intra-entity sales of assets other than inventory, the exception under current standards that permits the tax effects of intra-entity asset transfers to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new standard was effective for the Company on January 1, 2018. There was not a material impact to the Company’s Consolidated Financial Statements upon adoption.
In January 2017, the FASB issued Accounting Standards Update 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” or ASU 2017-01. The amendments in ASU 2017-01 provide a screen to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. Under ASU 2017-01, an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business and the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. ASU 2017-01 also narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. ASU 2017-01 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2017, with early adoption permitted. The Company prospectively adopted ASU 2017-01 in the fourth quarter of 2016. The Company expects that the standard will result in accounting for more transactions as asset acquisitions as opposed to business combination.
In January 2017, the FASB issued Accounting Standards Update 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” or ASU 2017-04. The amendments in ASU 2017-04 simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities. Instead, under the amendments in ASU 2017-04, an entity performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but not more than the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2019, with early adoption permitted. The Company adopted this standard in the third quarter of 2017.
In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires the service cost component to be presented separately from the other components of net benefit costs. Service cost will be presented with other employee compensation cost within income from operations. The other components of net benefit cost, such as interest cost, expected return on plan assets, amortization of prior service cost and gains or losses are required to be presented in other income. The Company adopted this standard on January 1, 2018.
Prior to January 1, 2018, all components of pension expense were recognized in operating income. The adoption of the standard impacted the Company’s Statement of Operations for year ending December 31, 2017 by increasing operating expenses $0.2 million and increasing other income by the same amount. For the year ending December 31, 2016 the adoption decreased operating expenses by $1.4 million and decreased other income by the same amount. There was no impact on income before income taxes. The Company elected the practical expedient allowing the use of the amounts disclosed for the various components of net benefit cost in the pension and other postretirement benefit plans footnote as the basis for the retrospective application.
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). The standard: (a) expands and refines hedge accounting for both financial and non-financial risk components, (b) aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and (c) includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company adopted ASU 2017-12 on January 1, 2019. There was not a material impact to the Company’s Consolidated Financial Statements upon adoption.
In February 2018, the FASB issued ASU 2018-02 “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” (“ASU 2018-02”). The standard gives entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income that were impacted by the 2017 Tax Cuts and Jobs Act. The guidance is effective for all entities for fiscal years beginning after December 31, 2018 and interim periods within those fiscal years. Early adoption is permitted. The guidance may be applied in the period of adoption or retrospectively to each impacted period. The Company has elected to early adopt ASU 2018-02 on its consolidated financial Statements and apply it to the period of adoption. The impact of the adoption results in a $0.8 million reclassification from accumulated other comprehensive income to retained earnings, which is offset by an equivalent valuation allowance, the net impact is zero.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). This standard requires entities that are customers in cloud computing arrangements to defer implementation costs if they would be capitalized by the entity in software licensing arrangements under the internal-use software guidance. The guidance may be applied retrospectively or prospectively to implementation costs incurred after the date of adoption. ASU 2018-15 is effective for annual and interim reporting periods beginning after December 15, 2019, with early adoption permitted. The Company prospectively adopted this standard in the fourth quarter of 2018. At December 31, 2018, the Company capitalized $0.6 million of implementation costs and none of that amount was amortized during the quarter. |
